Income and Capital Gains Tax Archives - Pat Carroll PCCO - Chartered Accountants & Tax Advisors

Venturing Abroad?

Foreign Earnings Deduction

• For the tax years 2012 to 2017 inclusive, relief from taxation may be claimed on a proportion of income earned by individuals who are resident in the State but who spend significant amounts of time working in a “relevant state”. The relief applies for the years of assessment 2012 to 2017 and does not apply to Universal Social Charge or PRSI. “Relevant state” means Brazil, Russia, India, China or South Africa, and:
• From 1 January 2013, includes Egypt, Algeria, Senegal, Tanzania, Kenya, Nigeria, Ghana or the Democratic Republic of the Congo, and
• From 1 January 2015, includes Japan, Singapore, the Republic of Korea, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Mexico and Malaysia.

Who Qualifies?

• Individuals who spend at least 40 days of the year working in the relevant State

BE AWARE

The Foreign Earnings Deduction does not apply to public servants nor does it apply to income –

• from an employment to which the remittance basis of taxation applies
• to which the key employee research and development tax relief applies
• to which the “split year” residence rules applies
• to which the cross border worker relief applies; or
• to which relief under the new special assignee relief programme (SARP) applies.

This tax deduction is contingent on the high earner restriction (where your income exceeds €125,000)

This tax deduction does not include income taxed under the provision basis

Tax Year 2015

E&OE

This blog post is general information; professional advice should always be sought.

Calling all employees! Claim your PAYE tax credit

Who qualifies?

An employee who pays tax through the PAYE system which includes any wages, salaries, pensions and social welfare benefits

NOTE

Your tax credit must be the lower of €1650 and your employment earnings for that year multiplied by the standard rate of tax.

Persons in a marriage are entitled to be assessed for tax credit separately as if they are a singly assessed person (in most cases, this is not a beneficial option).

BE AWARE

You are not entitled to this tax credit if you are a proprietary company director, spouse or child of such a director. However, children of PAYE Directors are entitled to the tax credit if:

• They are paid at least €4,572 by the company per year
• They devote their services fully to the company throughout the tax year
• They pay PRSI/USC and tax correctly through the PAYE system

• The child’s employment is in a qualifying PRSI contribution class.

Tax Tips

You may also be entitled to PAYE tax credit if you:

• claim old age pension contribution, retirement pension, unemployment benefit, disability benefit or occupational injuries benefit
• pay tax in a foreign country with the same PAYE system as Ireland

Tax Year Applicable: 2015

Benefit in Kind 

Some types of Benefit in Kind are a little harder to know how they are dealt with. Some common examples are:

• Subsidised gym

Non-cash benefit. You can be taxed for this.

• Subsidised bus/train ticket

The cost of a monthly or annual bus/train pass is exempt from BIK.

• Bicycles

You are exempt if your employer provides you with a bicycle (costing up to €1,000) for travel to and from work.

• Subsidised Childcare

This is exempt if the crèche is funded and managed by your employer. It doesn’t apply if it’s just subsidised by your employer

• Training courses

Work-related training courses are exempt.

Tax Year 2016

E&OE

This blog post is general information; professional advice should always be sought.

Medical Insurance Tax Credit

Have you paid medical insurance this tax year? Claim your tax credits!

You can claim tax credit on your medical insurance for the lower of:

•  the amount of the medical insurance premium at the standard rate of tax (20%) or
• the amount which reduces your income tax liability to nil

An age-related tax credit relief may also be applicable according to your age on the date the contract was made or the renewal date:

1) 60-65 years of age = €600

2) 65-69  = €975

3) 70-75 =  €1,400

4) 75-79 =  €2,025

5) 80-85 =  €2,400

6) 85 +    =  €2,700

Tax Tip

You can also claim tax credit relief on medical insurance premiums paid on behalf of a dependent relative

Go to www.revenue.ie for all insurers involved in the medical insurance credit system

Tax Year Applicable: 2015

E&OE

This blog post is general information; professional advice should always be sought.

Occupational Pension

How much can my employer contribute in to a pension scheme for me?

Example: Sample Maximum Contribution Rates, as % of Salary

Male Current Age                                Retirement Age

                                                                                       60                        65

• 30                                                                            72%                      54%
• 35                                                                            86%                      63%
• 40                                                                           108%                     76%
• 45                                                                          144%                     95%
• 50                                                                             216%                     126%
• 55                                                                               432%                     189%

Female Current Age                               Retirement Age

                                                                                         60                      65

• 30                                                                           67%                  49%
• 35                                                                           80%                 58%                      
• 40                                                                          100%                 69%
• 45                                                                          133%                 86%
• 50                                                                          200%                115%
• 55                                                                          400%                 173%

This information assumes that the member is married and will have completed at least 10 years’ service at retirement. Existing pension benefits are not included in the above rates. These rates are calculated using current Capitalisation Factors published by the Revenue Commissioners (as at April 2012). Member’s total pension fund is restricted to €2.4 million (Standard Fund Threshold).

E&OE

This blog post is general information; professional advice should always be sought.

Retirement Planning – Get tax relief on your pension contributions!

If you are a Self-Employed person or Employee:  (different rules apply to Company Directors/Shareholders)

There are limits for tax relief on contributions to PRSAs, RACs and Employee contributions to Occupational Pension Schemes

Limits apply according to your age during the tax year and percentage of Salary/Net Relevant Earnings:

• Under 30                               15%
• 30-39                                     20%
• 40-49                                     25%
• 50-54                                      30%
• 55- 59                                     39%
• 60 and over                           40%

NOTE

An earnings cap of €115,000 applies for tax relief purposes to aggregate contributions to occupational pension schemes

BE AWARE

The earnings cap does not apply to employer contributions to occupational pension schemes.

For occupational pension schemes the total contribution must be within the overall Revenue maximum contribution levels

Tax Year Applicable: 2015

E&OE

This blog post is general information; professional advice should always be sought.

State Pension: Contributory & Non-Contributory

Contributory

The State Pension (Contributory) is paid to people from the age of 66 who have enough Irish social insurance contributions. It is not means-tested. You can have other income and still get a State Pension (Contributory). This pension is taxable but you are unlikely to pay tax if it is your only income.

To qualify for a State Pension (Contributory) you must be aged 66 or over and have enough Class A, E, F,G, H, N or S social insurance contributions. You need to:

• Have paid social insurance contributions before a certain age
• Have a certain number of social insurance contributions paid and
• Have a certain average number over the years since you first started to pay

Non-Contributory

The means-tested State Pension (Non-Contributory) is a payment for people aged over 66 who do not qualify for a State Pension (Contributory) or who only qualify for a reduced contributory pension based on their insurance record. The qualifying age will rise to 67 in 2021 and 68 in 2028. You may qualify for the State Pension (Non-Contributory) if:

• You are aged 66 or over
• You pass a means test
• You meet the habitual residence condition

Your means are assessed under the following headings:

• Cash income (including income from work)
• Value of capital (for example, savings, investments, cash on hand and property but not your own home)
• Income from property personally used

State Pension (Non-Contributory) in 2015

Tax Year 2016

E&OE

This blog post is general information; professional advice should always be sought.

Other Irish “Income Taxes” (But not called Taxes)

PRSI and Universal Social Charge

PRSI

• Most employed people over 16 years of age make social insurance contributions. The amount you pay is based on your earnings and the type of work you do. For this reason it is called Pay Related Social Insurance (PRSI). The law makes your employer responsible for PRSI, though you may have to pay an employee’s share.
• The amount of PRSI paid by you and your employer depends on your social insurance class. Your social insurance class is in turn determined by your earnings and the type of work you do. Your employer deducts your PRSI contribution directly from your wages. Your employer also pays PRSI contributions for you. This contribution is not deducted from your pay.

Universal Social Charge

• The Universal Social Charge (USC) is a tax on income that replaced both the income levy and the health levy (also known as the health contribution) since 1 January 2011.
• You pay the USC if your gross income is more than €13,000 per year. Once your income is over this limit, you pay the relevant rate of USC on all of your income. It is calculated on a weekly or monthly basis.
• It does not apply to social welfare or similar payments, and there are certain other exceptions.

PRSI Rates

The 2 most common rates

• Self-Employed: S1
• Employees: A1

                                                                                             S1                                            A1

Employee                                            4% (first €127 per week exempt)                       4% on all income

Employer                                                                      N/A                                              10.75%

Universal Social Charge

Standard Rate for 2016:

Reduced Rate for 2016:

Reduced rates of USC apply to:

• People aged 70 or over whose aggregate income for the year is €60,000 or less
• Medical card holders aged under 70 whose aggregate income for the year is €60,000 or less.
• Aggregate income for USC purposes does not include payments from the Department of Social Protection.

The USC exemption threshold is €13,000. The USC is paid on gross income, before the deduction of capital allowances or pension contributions. It does not apply to social welfare payments, including contributory and non-contributory social welfare pensions

Tax Year Applicable: 2016

E&OE

This blog post is general information; professional advice should always be sought.

Capital Acquisitions Tax

Capital Acquisitions Tax comprises Gift Tax, Inheritance Tax and Discretionary Trust Tax. Gift tax is charged on taxable gifts taken (other than on a death) on or after 28 February, 1974 and Inheritance Tax is charged on taxable inheritances taken (on a death) on or after 1 April, 1975.

The Tax Free Thresholds for 2015 (On or after 14/10/2015)

Group A                                                    €280,000

• (Child)

Group B                                                    €30,150

• (Lineal ancestor/descendant, brother/sister or child of brother/sister)

Group C                                                       €15,075

• (Others)

The thresholds apply to all gifts and inheritances received since 5 December 1991

Tax Rate

On all gifts/inheritance above threshold                     33%

Annual Gift Exemption                                     €3,000

The annual small gift exemption can be availed of regardless of the relationship between the disponer (That is, the ‘giver’) and the beneficiary. The exemption is limited to one gift per beneficiary from each disponer in a calendar year. It does not impact on the CAT Thresholds noted above.

Capital Gains Tax

Principal Private Residence

If you sell your home (including grounds of up to one acre) and the house has been occupied as your sole or main residence throughout your period of ownership you may be entitled to full Principal Private Residence relief and thus exempt from capital gains tax on the sale. Examples of where this relief may be reduced would be where the home has also been used for business purposes or is being sold as development land.

Disposal of a Business or Farm

If you are aged 55 to 66, you may be entitled to relief from Capital Gains Tax on the sale or transfer of assets used for the purposes of farming or a trade, carried on by you, or of shares in your family company which you have owned for at least ten years. This relief is known as retirement relief although it is not necessary to retire in order to obtain this relief.

The relief is subject to a number of conditions. In general, it is not available if the proceeds of sale, or the market value at the date of transfer, exceed an amount provided for in the legislation. The maximum amount for which relief is allowed is €750,000 although marginal relief may apply on amounts slightly over this amount.

The upper limit for retirement relief for business and farming assets is reduced from €750,000 to €500,000 for individuals over 66 years. However, the current upper limit of €750,000 continues to apply for a transitional period of two years for individuals currently aged 66 or who reach that age before 31 December 2013.

Disposal of a Business or a Farm to a Child

Full retirement relief may be claimed by an individual aged 55 to 66 on the disposal to their child, of the whole or part of their qualifying assets.

An upper limit of €3m on retirement relief for business and farming assets disposed of within the family applies where the individual transferring the assets is aged 66 or over. However, the current unlimited amount continues to apply for a transitional period of two years for individuals currently aged 66 or who reach that age before 31 December 2013.

This relief is clawed back where the child disposes of the asset within six years from the date of acquisition.

Tax year Applicable: 2015

E&OE

This blog post is general information; professional advice should always be sought.